Oral arguments for the Myriad Genetics, Inc. appeals case is set to begin April 4 with a possible written decision in June 2011, RBC Capital Markets said.

Based on information from US Court of Appeals for the Federal Circuit, oral arguments for the Association for Molecular Pathology vs PTO case has formally been scheduled for April 4th. Previously on March 29, 2010, district court Judge Sweet issued a ruling that invalidated certain of Myriad Genetics’ patents related to the BRCA 1 and 2 breast and ovarian cancer susceptibility genes.

Myriad Genetics expects to hear the appeal in front of a panel of three judges from the United States Court of Appeals, or en banc in front of the full panel of 12 judges. A loss in either of these cases could lead to an appeal to Chief Rader, who has previously appeared pro-patent, which is favorable for Myriad Genetics.

We note that Jones Day is the current legal counsel and has limited the costs of legal fees to a very nominal amount for Myriad Genetics in this situation due to the importance of the case. We believe a formal decision could occur in June. A number of positive factors that could suggest a positive outcome, or overturn Sweet's decision, said Michael Yee, an analyst at RBC Capital.

The number of positive factors include: whether Assoc for Molecular Pathology had standing or jurisdiction to litigate in the first place (plaintiff is not harmed); American Bar Association wrote a 13-pg report in support of patentability of isolated genomic DNA to the House of Delegates; The Dept of Justice wrote an amicus brief to the Appeals Court stating they support patentability of Myriad's cDNA; Judge Sweet ruled patent ineligibility based on Bilski before it was overturned by the Supreme Court. Additionally, the Appeals Court overturned the Promethus case, citing that patent eligibility should be broader than a machine or transformation test; and Judge Sweet has ruled on four other patent cases, all of which were appealed and all were overturned by the court, which bodes well for Myriad.

If the appeals court does rule in favor of American Civil Liberties Union (ACLU), the outcome should have limited immediate impact on Myriad's business, as Myriad Genetics is still protected from other patents and claims that would be expected to block competitors from replicating Myriad's test.

Myriad Genetics stated that its composition of matter patents are estimated to expire in 2018 and that there are methods of use patents through 2022-2023. The company believes its database of 15,000 mutations (noting harm/harmless mutations) is a key competitive advantage over potential future generic entrants.

Yee maintained his outperform rating on shares of Myriad Genetics with the expectation that two overhangs can be removed this year to increase visibility on the long run and allow the stock to move higher into 2012-plus: AMA code should yield a price of about $3,000 in November; and appeals court should overturn the patent case in favor of Myriad Genetics in the summer.

European sales in fiscal 2012-13 are also upside not in estimates. In the near term, however, we acknowledge investor concerns on pricing and patent risk, which may keep the stock range-bound until improved visibility later in the year, said Yee.